The Chinese economy is steadily declining, and it appears to be having a direct impact on the casinos in Macau. With 39 casinos spread across the territory, a weaker yuan and trade wars, the threat to the world’s biggest casino hub is a reality.

“There is always something to worry about. We get that, we are just very bullish, and we are blinded by the extreme size of Macau, the market today, but more importantly the market tomorrow…” said Robert Goldstein, president of Las Vegas Sands, which controls Sands China.

A change of scenery and global tariffs

Despite an influx of arrivals, it seems that spending has slowed. According to data from Macau’s tourism body, a record 1.2 million visitors arrived over seven days during the Chinese New Year holiday, a 26.6% increase over last year. The hotels in the region are averaging an occupancy rate of 97%, so it was frustrating to learn that the casinos did not see an increase.

It seems as though more visitors are looking for holidays seeing the local architecture or experiencing the local cuisine rather than gambling.

The slowing growth of the mainland economy is also having a huge effect because the wallets of the frequent-visiting, big-spending VIPs are shrinking.

China has just this week lowered its economic growth target to 6%-6.5% in 2019. Matthew Maddox, chief executive of Wynn Macau, reportedly said on a conference call with investors at the end of January: “We remain watching the situation with caution … global growth is uncertain, and where the trade war ends up is also uncertain, we continue to experience peaks and valleys in Macau.” Speculation now turns to Beijing having to cope with U.S. tariffs and weakening domestic demand.

Belt-tightening and legislation

China is seeing a belt-tightening across a few areas linked to gambling. With authorities continuing to clamp down on underground lending and illegal transfers, the illicit capital flow from the mainland is ending. In January, authorities landed a huge bust of 30bn yuan ($4.5bn; £3.4bn), which was rather well-timed–just after President Xi Jinping’s warning of deep and complicated risks in China’s economy.

Macau, the country’s only legal gambling location, has also tightened its belt with “junket” operators. These are the middlemen of the gambling community; they provide credit for the “high rollers,” bring VIPs into the casinos, and collect on their debts. The regulators are strengthening operating and disclosure rules for these junkets, including but not limited to tightening the supervision of their accounts.

Paulo Chan (director of Macau’s Gaming Inspection and Coordination Bureau) has claimed that new legislation will improve the compliance of these junkets, who reportedly often use underground banking networks. Unfortunately, these new measures would likely have a huge impact on the overall casino revenue; the VIP market normally accounts for approximately half of the monthly sum ($3bn; £2.3bn).

Constant change

It has been 20 years since Macau’s handover from Portuguese rule. A lot has changed since then and more change is to come. It is the only territory in Ching where casino gambling is legal, but over this next year, there are going to be several policy and regulatory changes – falling in line with the election of a new leader in the Chinese special administrative region.

Whoever is chosen will work closely with mainland authorities for the next five years, overseeing the expiration of licenses for Melco Resorts, Sands China, MGM China, Wynn Macau, SJM Holdings, and Galaxy Entertainment.

The biggest contenders are Lionel Leong, the secretary for economy and finance (which oversees the gaming industry), and Ho lat Seng, the president of Macau’s Legislative Assembly.

Negative trends

With domestic loans and social financing also expected to show negative trends over the next six months, analysts are unsure how badly the casino industry will be affected. Forecasts predict anything from a decline to low single-digit growth.

Even with the newly opened Hong Kong-Macau-Zhuhai bridge offering a speedy 30-minute connection between Macau and Hong Kong’s international airport and the casinos, the weaker yuan may be enough to dissuade them from parting with their cash.